New York Markets After Hours

Dollar turns up on ‘cliff’ deal

DeborahLevine

SAN FRANCISCO (MarketWatch) — The dollar turned up against the euro and stayed higher versus the Japanese yen on Wednesday after Congress passed a bill to avoid much of the fiscal-cliff tax increases and delayed spending cuts threatening U.S. economic growth.

The dollar moved much lower in Asian and European trading after U.S. lawmakers passed a bipartisan deal to stave off tax increases for most Americans, which sent equities up sharply.Read more on U.S. stocks.

But technical levels in the currency markets still held, said Boris Schlossberg, managing director of FX strategy for BK Asset Management.

Obama praises fiscal-cliff deal

(7:09)

President Barack Obama said he would sign the bill sent to him by Congress to avert the U.S. fiscal cliff. Watch Obama's full statement, in which he praises the late-night deal.

“FX markets are much less enthused than equities about the cliff” deal, he said.

The euro
EURUSD, +0.05%
rose as high as $1.3299, but was again unable to top $1.33, he noted.

The shared currency lately slipped to $1.3177, compared with $1.3197 late Monday.

The ICE dollar index
DXY, +0.47%
which tracks the dollar against six major currencies, turned up to 79.847 from 79.792 late Monday in North America. Financial markets were broadly closed Tuesday for New Year’s Day.

The vote to sidestep the fiscal cliff, which economists believed could have thrown the U.S. back into recession, helped spur buying of riskier assets that tend to benefit from stronger growth, such as stocks and oil futures. See: Fiscal-cliff deal passes Congress.

Beyond the initial relief rally in riskier assets, the greenback could move back up as other concerns surface, including the debate over raising the U.S. debt limit, as well as financial issues still facing the euro zone, said Michael Turner, a fixed-income and currency strategist at Royal Bank of Canada. See: Economists say fiscal cliff not avoided.

While it may seem perverse, a protracted debate over the debt ceiling, leading to a debt downgrade and a period of risk aversion could actually strengthen the dollar,” said Russ Koesterich, global chief investment strategist at BlackRock.

Japanese yen

However, the dollar held strong gains against the Japanese yen.

Reuters

Japanese 10,000 yen bank notes

U.S. Treasury yields jumped sharply after the bill passed, making them more attractive to overseas investors who have to convert their currency to dollars to buy the bonds. Japan is among the largest investors in U.S. Treasurys. See: Treasury yields rise to highest since September.

The dollar
USDJPY, -0.06%
rose to ¥87.24 — its highest level since mid- 2010 — from ¥86.76 late Monday.

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